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CEOs this week when Mike Worhach stepped down after seven years and was replaced
by former Egenera CEO Mike Thompson.

Thompson, who joined Sepaton as executive vice president of worldwide sales and marketing last
July, spoke with SearchDataBackup about his plans as CEO. Thompson said Sepaton will maintain its
focus on large enterprise
data backup and add data analytics to its systems. He also defended post-processing
deduplication as the best way to scale to keep up with growing data protection requirements in
large enterprises.

SearchDataBackup: What changes are you seeing in disk-based backup? Is Ethernet playing a
greater role in the enterprise than when Sepaton first started shipping Fibre Channel-based VTLs
[in 2003]?

Thompson: We’re primarily seeing Fibre Channel where we play at the high-end large
enterprise part of the market -- defined as companies backing up 10 TB and beyond each night. But
we’re also seeing clients including 10-Gigabit Ethernet and looking for alternatives. I think the
market for Fibre in VTL continues to be quite large. We’ll see a lot of growth in the market. In
the second half of last year, we signed some sizable new clients with Fibre-based VTL, but they
also wanted to have OST
[Symantec Open Storage protocol] running 10-Gigabit Ethernet. They liked the fact that Sepaton
provided a common platform for multiple protocols. There’s a huge market for Fibre VTLs, but
clients over time will migrate to 10-Gigabit Ethernet.

The other trend that I see is the need for better data analytics. Customers want to be more
informed in terms of what’s been backed up, what kind of efficiencies they’re getting, so they can
tune these systems as they go. They don’t have the kind of information and knowledge they’re
looking for. We offer lot of data analytics and our clients are asking for more.

SearchDataBackup: Does Sepaton develop its own analytics application?

Thompson: We are in discussions with partners to offer different alternatives. But we
have a product called DeltaView that allows clients to see everything that’s happening in the
system. They can see every backup application and the efficiencies of these applications, and can
make informed decisions to improve the operations.

SearchDataBackup: Who are your main competitors in the enterprise?

Thompson: We see EMC and IBM the most. Because of where we’re focused, it’s usually EMC
with Avamar
or Data
Domain, or IBM with Diligent.
Every once in a while we see one of the other competitors, but they’re mostly focused on low end or
mid-enterprise. The question that clients have to look at is, do they want a scalable platform or a
point product where they’re going to experience sprawl throughout the data protection space? In our
industry, sprawl is a bad word. Sprawl means data center complexity where companies have multiple
systems, each with their own set of requirements and challenges.

The focus is on our real strength, the high end of the business, large enterprises. When you
think of the competitive landscape, you see a lot of products that are more point products,
single-node or dual-node controller type data protection systems. Their challenge is scaling their
platforms to handle the growth we’re seeing customers have today. The business challenge our
clients have is to address the tremendous year-to-year growth of data. That challenge becomes
apparent when you’re backing up this information and you need to have timely recovery of this
information.

SearchDataBackup: Data deduplication is now a common feature in disk backup. Does that help
manage growth?

Thompson: Deduplication has made disk-based data projection cost effective. But there’s
still a requirement to get data off primary storage to disk-based data protection, and
deduplication doesn’t help in that regards. In fact, some approaches where companies have inline
deduplication actually make it more challenging. Sepaton does deduplication in post-process
fashion, we’re focused on customer’s need to backup large mass of data in a definite window of time
and recover that very quickly.

Thompson: Not at this point. For the next couple of years our focus will be optimizing
backup and restores.

SearchDataBackup: Does your OEM deal with Hewlett-Packard help Sepaton sell into the
enterprise?

Thompson: Yes. It’s a subset of our business, not a majority of our business. We look
forward to continue a healthy relationship with HP. We represent the high end of the marketplace
for HP’s VTL.

SearchDataBackup: HP has StoreOnce
deduplication software, which it plans to eventually extend beyond its low-end disk backup. Will
that mean HP will no longer need Sepaton?

Thompson: That’s yet to be seen. Our IP is our scalable platform. It took a long time to
get our product developed with efficient deduplication software capability built on top of that.
There’s a reason why our competitors have point solutions with single or dual node controllers. The
reason is, it’s hard. This company accomplished that, and we’re building on that platform.

Our platform today scales beyond what any customers have required so far. We want to stay ahead
of the customer base and make sure our platform will be able to scale to whatever level the
customers need.

SearchDataBackup: Is Sepaton profitable yet after seven years of sales?

Thompson: We’re close to break-even. We had very good growth last year, especially in the
second half of the year. We signed several new clients who were large million-dollar plus
orders.

SearchDataBackup: Are you positioning Sepaton to go public if the IPO market comes
back?

Thompson: We have put in place a business model for this year and the next two years that
shows meaningful revenue growth over the next three years that positions us to be a high-growth
profitable sustaining company. Included in that is new product innovations under development.
Certainly an IPO could be an option for us.